Good read - The Craft Beer Market Has Exploded, And Now Brewers ...

[kukubau]

Good article

The Craft Beer Market Has Exploded, And Now Brewers Are Worried About A Collapse

http://www.businessinsider.com/alchemist-craft-beer-market-boom-bubble-outlook-2013-12

 

[Hello]

The bottom can likely fall out and while I think Koch is indeed an arrogant bastard, he's not entirely wrong. We're given a dizzying amount of choices of craft beer. There's never going to be a lack of choices but new breweries may not find the success that Stone, Alchemist, and Goose Island (pre sale) found.

I'm not sure if brewers in general are worried. I didn't get that entirely. Analysts will say anything, or wrote anything. I do think the margin for profit can fluctuate if you're in a saturated market.

 

[grathan]

Good beer will always sell. Especially in a bad economy. I wonder how much of the market though is people buying a beer for the first time. I'll always try a new IIPA when I see it, but rarely buy it again unless it's really good (that seems to be less than %5 of the beers I try).

 

[BigJack]

Thanks for posting it. I think the market is certainly too crowded and not all of these breweries can make it and some of the ones who will make it will do so as strictly local operations with a strictly local following. And lets be honest- many of these breweries are "also rans" in terms of quality and innovation. I haven't had many "bad" craft beers, but I've had many mediocre ones.

Economic Darwinism has to come into play at some point. The breweries with the best product and/or the best marketing and business model will survive and the rest won't. That shouldn't be seen as a terrible thing.

 

[hunter_le five]

The craft beer bubble popped in the 90s, and it will likely happen again. Life moves on. A lot of the little guys may go under and new startups may have a hard time getting funding for a while, but we'll still be left with a plethora of choices no doubt. I often feel overwhelmed as it is when I walk into the bottle shop. For anyone who's got the money, there will be a lot of brewery equipment being liquidated for relatively cheap.

 

[drainbamage]

I just got done reading this after a friend also posted the link to FB. One interesting point they brought up is that there isn't as much brand loyalty in craft beer, as people are constantly wanting to try the latest and greatest and then move on to the next.

I would think the biggest challenge as a brewery owner is to keep coming up with new and unique brews. It was different several years ago when about all it took was a decent IPA to set you apart. Now that every brewery halfway worth a crap has several IPAs and IIPAs, they have to do something else to make their stuff stand out.

 

[BigJack]

I just got done reading this after a friend also posted the link to FB. One interesting point they brought up is that there isn't as much brand loyalty in craft beer, as people are constantly wanting to try the latest and greatest and then move on to the next.

Interesting point. Then again, I think the craft breweries themselves encourage a more liberal attitude in terms of brand loyalty. The owners of the biggest craft breweries often appear together, compliment one-another's products, and even put out collaborative beers between themselves or with smaller, lesser-known breweries.

If you take the expressed corporate values of Stone Brewing or Boston Beer Co or DFH or Sierra Nevada seriously, it would hard to express that Harry Carrey "I'm a Bud man" loyalty. Bud doesn't want you to try Miller. Stone wants you to try Ballast Point.

That said, I'm guess that most craft beer fans have some favorites that we go back to often- and if the market shrank dramatically, I'm guessing many of us would buy our favorites with more frequency just to ensure their survival.

 

[TNGabe]

I stopped reading when the author referred to Heady as 'boozy' and 'bitter' as it's neither.

 

[BigJack]

I stopped reading when the author referred to Heady as 'boozy' and 'bitter' as it's neither.

Considering that the author is comparing craft beer to mass-produced beer, I don't see your objection. Compared to Miller Lite, it is both boozy and bitter.

 

[drainbamage]

That said, I'm guess that most craft beer fans have some favorites that we go back to often- and if the market shrank dramatically, I'm guessing many of us would buy our favorites with more frequency just to ensure their survival.

This is how I buy too, although I do know people that almost exclusively buy new stuff. I guess I'd probably spend more time trying out the new, hyped-up stuff if I had more money to spare.

I guess the more accurate way to put it is that people might develop loyalty to a certain brewery, but not to a specific beer of theirs, hence the need for constant innovation. It seems like a lot of the new breweries opening up in my area are focusing on a pretty limited lineup of year-round brews, and then a ton of seasonal or one-off experimental batches. I can't imagine the difficulty of reaching any kind of consistency under those conditions.

 

[BigJack]

It seems like a lot of the new breweries opening up in my area are focusing on a pretty limited lineup of year-round brews, and then a ton of seasonal or one-off experimental batches. I can't imagine the difficulty of reaching any kind of consistency under those conditions.

Could this be a case of throwing stuff on the wall and seeing what sticks by the new breweries?

It's a crowded market. Newcomers have to get crazy just to get noticed.

As for the established players, I don't have the data, but I'd bet that their core beers account for most of their business, not the experimentals and one-offs. In fact, I'd bet that their base beers are what give them the steady income they need to cover the cost of developing and offering more adventurous brews.

Anecdotally, my favorites grocery store won't get a drop of Crime and Punishment, but Stone IPA and Arrogant Bastard are always in stock and always selling. They've never had Lips of Faith, but they carry Fat Tire and Abbey all the time. They don't get the Fresh Harvest bombers, but you can get SNPA in bottles or cans. Seems to me that there are some bedrock craft beers driving the market for the biggest of the little guys.

 

[Nightshade]

It seems like a lot of the new breweries opening up in my area are focusing on a pretty limited lineup of year-round brews, and then a ton of seasonal or one-off experimental batches. I can't imagine the difficulty of reaching any kind of consistency under those conditions.

I see where you are going with this but on the other hand what if they are good brews and the constant change of flavors keeps the seats full and beer flowing?

 

[rico567]

There is a business cycle, and always has been. There are no exemptions for malted beverages. It's not a question of IF the craft beer market will collapse, only WHEN.
Anyone who somehow believes that the craft beer market can go on expanding the way it has for the past decade needs to read into the history of the stock market prior to 1929. Or the denouement of the dot-com boom of the '90s. Or the criminally facilitated real estate boom that collapsed in '08, leaving our present economy moribund. Or.....

 

[C-Rider]

As a home brewer I don't drink a lot of craft beers. From time to time I'll buy one that has had good reviews to compare to mine. So having over 2000 craft brewers out there makes no diff to me.

 

[Phunhog]

It all boils down to money!! It seems like a lot of brewery owners/brewers have left other successful careers to enter the brewing industry. What happens when they realize that the 50% cut in pay is not temporary but permenant? I doubt most will stay in the industry and will return to something that has more financial incentive.

 

[jonmohno]

Heres a record scratch in this discussion I dont completly understand. I read the article but then I seen a " heres what countries are running out of water" pop up.... Bigger worries than a craft beer collapse I suppose?

I dont understand why there would be a collapse really. I dint exactly follow the whole article really-unless someone cares to summarize it. I mean craft beer will sell locally and they are only so big, I see that Lagunitas is operating in Chicago soon or now or I dont know when but I love them and think they are standout brewery and they have grown-so what its not going to make people stop buying other beer they like. I think if the beer is good it will at least sell well locally. Craft beer is growing more than ever, so how would people stop buying good beer? I dont think people that buy craft beer are waiting for them to be discounted either. Despite all of that they are still making pretty good premiums for sixers/bombers/12 packs. If the beer is good it will sell,if the beer is great it will sell well.

 

[JPrather]

Thanks for posting this. Good read for sure.

There is a business cycle, and always has been. There are no exemptions for malted beverages. It's not a question of IF the craft beer market will collapse, only WHEN.
Anyone who somehow believes that the craft beer market can go on expanding the way it has for the past decade needs to read into the history of the stock market prior to 1929. Or the denouement of the dot-com boom of the '90s. Or the criminally facilitated real estate boom that collapsed in '08, leaving our present economy moribund. Or.....

It's going to take a lot more than "I can cite the three most famous historical bubbles, therefore any economic boom is a bubble that will burst" to prove your point here. That logic is pretty flawed.

That being said, there is something to be concerned about here, but I'm not sure that the superlatives being thrown about are quite accurate. A "bubble" leading to a "collapse" implies a rapid drop in industry-wide demand and/or a massive influx of capital attempting to claim its share of future revenue that doesn't exist.

As long as demand for beer and craft beer doesn't collapse quickly, and as long as you don't have massive, huge investment that's being promised a huge return on investment that is no longer possible in a crowded market, you don't see a true "bubble/bust" scenario.

The article itself states that breweries are under-capitalized. This means you have people getting into the industry on shoestring budgets and/or leveraging themselves to the hilt, who need to see immediate success and widespread growth to stick.

Once such a market gets crowded, that becomes impossible, and you see a relatively-quick transformation where many breweries disappear, and you're left with the ones who are absurdly-capitalized, and/or have carved out a reasonable market share. I also think that becomes a boon for some smaller (nano-ish?) breweries who managed to open without over-leveraging and over-extending themselves, which may become an interesting niche. Shrug.

 

[JohnSand]

The article is interesting, but I'm unconcerned. I agree with JPrather, a bubble is over investment resulting in false overvaluing of a limited commodity. It doesn't apply here. The article belies some of it's own concerns: 43 craft brewers folded in 2012, (While 400 opened) up from 37 the year before. In a field of 2400, that's not a statistical difference. No, the market will not continue to increase forever. And breweries will come and go, some because they don't know how to manage a business. It's capitalism, it works. Maybe the fad for exotic beer at high prices will pass, but I don't participate in that.
I was interested too see that Sam Adams has exceeded the definition of craft beer, I sort of thought that. I'm still going to drink it though.

 

[Helly]

Thanks for sharing.

 

[ArkotRamathorn]

I was interested too see that Sam Adams has exceeded the definition of craft beer, I sort of thought that. I'm still going to drink it though.

In the end this is what matters the most, it doesn't matter if they fall into the category of "craft". If you really enjoy Shocktop or Blue Moon (which, I think Blue Moon is a tasty beer, I don't care the money is going to Coors or whoever) then drink whats tasty to you.

I have a set of beers I will always buy, my first option is New Glarus, but since they do a very heavy seasonally based beer schedule, like right now they don't have any stouts/porters available, I will move to other options, defaulting to something local if I feel like a stout/porter. If New Glarus went under, I would be heart broken, but I think even if the craft market collapsed their big enough to survive. On the other hand theres a local place called Lazy Monk, they have really great beer and potentially if the craft market popped, they might go under, but I also think they'd survive just because theres a decent following locally that purchases their beer. If their beer sucked, then they wouldn't survive.

If/when it pops the places that make tasty beer will survive, if they make tasty beer but practicing bad business theyll go under, which would be sad, but since we're all home brewers here with (some of us) ambitions to open our own breweries some day, thats a good thing because it would open space in the market. Also if a place goes under and you don't have any ambition to open your own brewery, why wouldn't the owners share their recipes with you so you could just make it yourself and continue to enjoy it?

 

[jbsg02]

It's certainly a bubble, I live in Dallas and we went from 2 microbreweries to probably a dozen or more in the general area within a couple of years. I used to have dreams about opening a brewery but even I'm smart enough to realize I'd be way behind the curve at this point.

 

[mbbransc]

Good beer will always sell. Especially in a bad economy. I wonder how much of the market though is people buying a beer for the first time. I'll always try a new IIPA when I see it, but rarely buy it again unless it's really good (that seems to be less than %5 of the beers I try).

This speaks to my buying habits as well (but also includes BIG stouts/porters). Part of me thinks breweries have caught on so now they all have 6-10 one-offs they release each year and that gets my residual business. Very rarely will I buy a pack of anything and when I do, it's one of two scenarios: 1) I tried a single/bber and loved it or 2) It's a LOCAL GO-TO option for me. I like trying lots of different things but I want to support my local breweries the most I can.


Many others have stated "good beer will sale" and that's true. It's not always a bad thing with markets shrink or consolidate. It's just a thinning of the herd. But there will always be good beer to drink.

 

[iijakii]

I'll have to do some more reading on this subject matter soon, it's definitely interesting. I agree that there's going to be 'too many' choices soon - shelf-space and tap-handles are limited, that's just a simple fact. But moving from Fort Worth, TX to Portland, OR this year I'm even more conscious to the concept of local-loyalty. You'd be amazed at how many mediocre breweries there are here in Portland that are booming so hard just because everyone wants to buy local. And I have no problem with that. I don't see why breweries can't survive in a couple metropolitan areas. There's certainly enough people.

That said, brewpubs are where it's at anyways. Customer loyalty and charging $900 a keg instead of selling one for $100!

 

[iijakii]

The plethora of choices is also a reason we're getting such ridiculous beers. You have to be unique and bring something new to the table. Four years ago having a decent IPA was enough to set you apart. Now everyone has two and you have to have an even bigger IIPA. The innovation isn't necessarily bad, but it's a reason why many of the greater styles are falling by the wayside and everyone has the same mediocre IIPAs and sometimes good stouts. Not sure why since only the beer snobs buy them anyways. Go to most bars or a store and it's still Hefes and Deschuets BBP being pounded.

 

[Punity]

I think alot where the industry goes is depending on what new breweries want to be. For me our county has one brewery and its small, distributes one beer to one bar and thats it outside of it tasting room. Im not trying to muscle in to Seattle, Portland, San Diego; I want to be that local place that the county can identify with build my presence here and enjoy what I do. I'm not looking to take on and be a giant and I didn't have to leverage the farm to startup.

I do think some people are going to get smacked with reality, but what industry doesn't?

Edit- can a market like this one really "collapse" Is that possible with this product?

 

[Flipadelphia]

I stopped reading when the author referred to Heady as 'boozy' and 'bitter' as it's neither.

That caused you to stop reading the article? Sheesh.

 

[TNGabe]

It's certainly a bubble, I live in Dallas and we went from 2 microbreweries to probably a dozen or more in the general area within a couple of years. I used to have dreams about opening a brewery but even I'm smart enough to realize I'd be way behind the curve at this point.

http://en.wikipedia.org/wiki/Economic_bubble

 

[TNGabe]

That caused you to stop reading the article? Sheesh.

After the Xth time I saw it posted, I did finish reading the article, but I can't take an article very seriously once the author had demonstrated a lack of knowledge on the subject.

 

[motleybrew]

A personal opinion is a lack of knowledge?

I brew beer and don't like IPAs, does that mean I have a lack of knowledge about beer?

It's this attitude that results in threads like the one about boycotting the brew shop.

 

[ArkotRamathorn]

Edit- can a market like this one really "collapse" Is that possible with this product?

I was partially questioning this too, it might pop for "craft" breweries that distribute on a regional level or higher. But I can't see how companies that only distribute locally within their state/immediate area would necessarily "pop", unless by pop they mean that with so much selection that people (craft beer drinkers) will suddenly just spontaneously start buying BMC again...

If anything I'd bet the trend is to move to smaller and more local craft brews, so potentially larger breweries like the ones I mentioned above that distribute regionally might lose market share because of local-loyalty type situations. But that would jsut be loss of market share, not "popping" of a bubble.

Edit: Is craft brewing/breweries really such a massive investment opportunity that we would see major levels of investment that would suddenly evaporate if a bunch of breweries went under? My sub-par knowledge of economics would suggest that unless theres a massive level of investment/risky loans there wouldn't be a popping of a bubble. If the banks started seeing a die off of breweries or over-saturation of the market they may stop giving loans, but its not like it'd kill of any of big state level favorites.

 

[TNGabe]

A personal opinion is a lack of knowledge? I brew beer and don't like IPAs, does that mean I have a lack of knowledge about beer? It's this attitude that results in threads like the one about boycotting the brew shop.

Boozy means that a beer has noticeable alcohol heat. Bitter is self explanatory. Heady Topper, while strong and hoppy, is neither boozy nor bitter, explaining it's massive popularity. That's not an opinion, it's a fact. How you extrapolated that I'm suggesting disliking ipas makes you ignorant about beer or related my statement to any brew shop boycott, I have no idea.